BARCELONA, Spain - The smell of sangria, the taste of croquetas, the beat of Spanish music pouring into the city streets and the sound of crashing waves along the shoreline were certainly not distractions from the Global Asset Securitization Conference in Barcelona. On the contrary, it seems as though these features, unique to the Spanish city, helped to draw more market participants this year than any other conference including ABS East and ABS West.

Many market sources have often raved that this is the hottest conference of the year. In fact, several months ago, one insurance source remarked, "If you can only go to one conference this year, make it Barcelona." With 2,100 attendees at this year's fifth annual investors' and issuers'summit, sponsored by Frank Fabozzi - up from 1,800 last year and nearly 100 corporate sponsors, up from 80 a year ago - it looks as though the gossip has traveled across the waters.

The growth in the size of the conference is a reflection of how fast the market is growing. "In the past, [securitization] may have been about 1% or 2% of a company's portfolio, but now it's like 5% to 10% of their portfolio, which might not seem like much, but it is," said one analyst.

Basel: Less issuance?

The crowd was dominated by issuers, investors and lawyers and many of the sessions, like The Impact of the Basel Accord and International Accounting Standards on Investors, were standing room only. The Basel Accord session seems to have received a great deal of attention as a result of the market's concern regarding the new regulations. "This is a complex and developing area," said one panelist. "If you haven't already, take an interest in it even though the consultation period is over."

While the details of Basel have yet to be released, some things were made certain during this session. The new accord, which will be in use by 2004, will produce higher capital charges for 364-day facilities and may therefore lead to less issuance. According to sources at the conference, the proposals for the new accord have evoked major concerns that were expressed during the consultation period, and as a result, the BIS committee may have to return to the drawing board.

Another session that was well attended was Finding Relative Value in the European ABS/MBS Market: The Search Continues. Alexander Batcharov, managing director of Merrill Lynch International, one of the panelists, took a poll and discovered that there were more than 300 attendees at this particular session, one-third of which were investors. Additionally, all of the investors, with the exception of one, have been investing in ABS for more than one year, and more than half of those investors have increased their ABS allocations from an institutional portfolio perspective during the last year.

"There are expectations that the issuance volume will exceed $100 billion this year; last year there was $86 million," Batcharov said. "It's a growing market. There are many new kinds of corporate issuances like telecoms, water companies..."

Concerns about economy

The changes in both the European and the United States economies also seemed to spark some controversy. While some panelists noted that there will be a recession in the U.S., another asserted that is not what he believed. Either way, most speakers were in agreement that a downturn of the economy will spin the securitization market. They predicted that there will be greater volumes and greater variety in future transactions.

One panelist said that market players are nervous about the economic environment because many have been in ABS for a few years and for those few years, the market has been good. "They are dealing with this for the first time."

In order for investors to stay afloat during tough times, one of the panelists suggested that investors avoid black boxes. "Know what your assets are, and know who's doing the servicing," said the panelist. Additionally, the panelist said investors should be diversified. "Lots of U.S. investors are buying European securitizations. Buy wrapped transactions, or if you're worried, buy a wrap for an existing transaction."

During the sessions, many attendees floated about the tables mingling with people they have spoken to over the phone, but have never actually met. "The best thing about the conference by far is putting faces with names and finally meeting people," one analyst said. Another market source said, "I get more out of meeting the people here than anything else."

While the conference seems to be rewarding for the attendees on a business as well as personal level, there are a couple of drawbacks, according to Batcharov. "The conference has outgrown it's location. Everything is squished there." Sources say that next year there will be even more participants and it will therefore be moved to Barcelona's conference center.

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